RTGS (RTGS)
RTGS stands for real-time gross settlement: a system that settles each payment individually and finally in central bank money, rather than offsetting many payments against each other and settling only the difference at the end of a cycle.
Also called: real-time gross settlement
Gross is the operative word. In an RTGS system each payment is settled on its own, for its full amount, against the sending institution’s balance at the central bank, and it is final the moment it settles. There is no cycle to wait for and nothing to unwind.
The alternative is netting. In a deferred net settlement system, obligations build up through the day and only the differences change hands at the end, which needs far less money sitting in accounts but leaves participants exposed to one another until the cycle closes. RTGS removes that exposure by settling immediately and pays for it in liquidity: the sender must have the full amount available at the instant each payment is released. That is why RTGS systems queue payments and why central banks lend intraday against collateral.
Most countries operate one, and it is normally the backbone for high-value domestic payments — Fedwire for US dollars, T2 for the euro, CHAPS for sterling. Retail payments usually travel on cheaper netted systems whose net positions are then settled across the RTGS, so the two designs sit on top of each other rather than competing.
In practice
Gross settlement means each payment settles individually and finally in central bank money, which is why RTGS payments are generally not recallable. Once a payment has settled, getting it back depends on the goodwill of the receiving bank and its customer, not on any right the sender holds.
Commonly confused with
| Term | How it differs |
|---|---|
| Netting | Netting offsets many obligations and settles only the difference; RTGS settles each payment in full, on its own, as it arrives. |
| Real-time payments | An instant retail scheme gives the beneficiary funds in seconds; whether the interbank settlement behind it is gross and immediate depends on how that scheme was designed. |
See also
- FedwireFedwire is the Federal Reserve’s real-time gross settlement system for US dollar wires. Each payment is settled on its own, for its full amount, across the banks’ accounts at the Federal Reserve, and it is final the moment it settles.
- SettlementSettlement is the point at which value actually moves between parties and the obligation between them is discharged. It is a separate step from clearing, which only works out who owes what, and from finality, which is the moment the transfer can no longer be reversed.
- NettingNetting is offsetting mutual obligations so that only the difference actually moves. Two parties that have been paying each other all day settle one payment for the net amount, which cuts both the funds transferred and the liquidity each side must hold to support them.
- Real-Time PaymentsReal-time payments are bank transfers that clear and settle within seconds, at any hour, and are irrevocable once the receiving bank accepts them. RTP is also the proper name of one of the two US instant networks, which is a common source of confusion.